Treasury Secretary may have known a lot more than he admits about the huge and controversial bonuses paid out by insurance giant AIG to its employees.
The New York Times reports that Geithner admitted knowing about bonuses at AIG two weeks ago after claiming this week he only learned about them later.
The question was direct and prescient. Representative Joseph Crowley, Democrat of New York, asked the Treasury secretary in an open hearing what could be done to stop American International Group from paying $165 million in bonuses to hundreds of employees in the very unit that had nearly destroyed the company.
Timothy F. Geithner, the Treasury secretary, responded by saying that executive pay in the financial industry had gotten “out of whack” in recent years, and pledged to crack down on exorbitant pay at companies like A.I.G. that were being bailed out with billons of taxpayer dollars.
The exchange took place before the House Ways and Means Committee on March 3 — one week before Mr. Geithner claims he first learned that the failed insurance company was about to pay a round of bonuses that have since caused a political uproar.
A Treasury spokesman, Isaac Baker, said in a statement on Thursday night, “Although Congressman Crowley raised the issue of the bonuses two weeks ago, Secretary Geithner was not aware of the timing or full extent of the contractual retention payments or the other bonus programs until his staff brought them to his attention on March 10.”
Mr. Baker said that after Mr. Geithner had been briefed on the bonuses, he called Edward M. Liddy, the chief executive of A.I.G., and “insisted that they be renegotiated and restructured, in light of the extraordinary assistance being provided by taxpayers.”
Mr. Baker added that Mr. Geithner “takes full responsibility for not being aware of these programs before last week.”
Interviews with senior Federal Reserve and Treasury officials, as well as members of Congress, leave little doubt that the bonus program was a disaster hiding in plain sight. Mr. Geithner is not the only one who appears not to have understood the populist fury the bonuses would set off.